Beer Trader

I would go with the Elijah Craig 12 year. Last year I drank an EC18 and it was phenomenal. I imagine the EC12 would have to be good, and even if it's just a fraction as good as the EC18 was it would still be awesome.

it's not a message people want to hear, but breaking the underlying whiskey's price point is an important psychological barrier. though, credit to geezlynn for pointing out that allagash did it first.

Click to expand...

I would think that the beer aged in barrels, costs WAY more in the end than just the whiskey itself. Maybe I'm crazy, but I have a feeling that these companys have caught on and don't just give "old barrells" away.

I would think that the beer aged in barrels, costs WAY more in the end than just the whiskey itself.

Click to expand...

why? 99% of barrel-aged beer costs less than most good-quality whiskeys. are you suggesting barrel-aged beer is low-margin or even a loss leader? i find that extremely unlikely.

Maybe I'm crazy, but I have a feeling that these companys have caught on and don't just give "old barrells" away.

Click to expand...

they aren't, but bourbon barrels can only be used once, by law. you can't call it bourbon if you reuse a barrel. so the used barrels have to be sold. i don't know the full economics going on; i imagine a lot of distilleries don't want beer piggybacking on the brand they've created, so i don't know how breweries get away with advertising, "now aged on pappy!!" quite brazenly. there may be some lawsuits over trademarks in the future.

i think the beer industry is largely cannibalizing resold barrels (way more breweries want barrels now than 4 years ago), in addition to the normal demand that existed from e.g. scotch distilleries (which often buy used bourbon barrels).

Beer Trader

Bernheim Wheat was awesome. Looking back I wish I would have stuck to this and bypassed the Rebel Yell and Old Fitz last year. The 09 Elijah Craig I had today was BOSS so I don't think you could go wrong with that anytime.

why? 99% of barrel-aged beer costs less than most good-quality whiskeys. are you suggesting barrel-aged beer is low-margin or even a loss leader? i find that extremely unlikely.

they aren't, but bourbon barrels can only be used once, by law. you can't call it bourbon if you reuse a barrel. so the used barrels have to be sold. i don't know the full economics going on; i imagine a lot of distilleries don't want beer piggybacking on the brand they've created, so i don't know how breweries get away with advertising, "now aged on pappy!!" quite brazenly. there may be some lawsuits over trademarks in the future.

i think the beer industry is largely cannibalizing resold barrels (way more breweries want barrels now than 4 years ago), in addition to the normal demand that existed from e.g. scotch distilleries (which often buy used bourbon barrels).

Beer Trader

I would think that the beer aged in barrels, costs WAY more in the end than just the whiskey itself. Maybe I'm crazy, but I have a feeling that these companys have caught on and don't just give "old barrells" away.

Click to expand...

The new charred american oak barrels required for Bourbon have a decent cost new but they charge a premium to beer makers. Because there are millions of barrels that need to go every year the big bourbon suppliers bulk sell them and those customers that buy small quantities (i.,e., beer makers) typically pay double the cost of what the barrel costs the whiskey supplier.

The big bourbon suppliers have finely tuned operations and of course, the cost of the liquid alone is far less than beer in the same barrel. If you look at a 750ml bottle of Jim or Evan it's roughly the price of many BB bombers even though the FET is significantly greater on spirits than beer. The raw materials cost more for beer makers because they don't have the same commodity bargaining power and they definately don't get the same bulk discounts and gigantic whiskey suppliers.

Beer Trader

why? 99% of barrel-aged beer costs less than most good-quality whiskeys. are you suggesting barrel-aged beer is low-margin or even a loss leader? i find that extremely unlikely.

they aren't, but bourbon barrels can only be used once, by law. you can't call it bourbon if you reuse a barrel. so the used barrels have to be sold. i don't know the full economics going on; i imagine a lot of distilleries don't want beer piggybacking on the brand they've created, so i don't know how breweries get away with advertising, "now aged on pappy!!" quite brazenly. there may be some lawsuits over trademarks in the future.

i think the beer industry is largely cannibalizing resold barrels (way more breweries want barrels now than 4 years ago), in addition to the normal demand that existed from e.g. scotch distilleries (which often buy used bourbon barrels).

Click to expand...

You make some interesting points. To hear that Eclipse is still sitting on shelves in various locations is a bit surprising given its previous sales history. 5050 may have to up their game or reconsider price point.

why? 99% of barrel-aged beer costs less than most good-quality whiskeys. are you suggesting barrel-aged beer is low-margin or even a loss leader? i find that extremely unlikely.

they aren't, but bourbon barrels can only be used once, by law. you can't call it bourbon if you reuse a barrel. so the used barrels have to be sold. i don't know the full economics going on; i imagine a lot of distilleries don't want beer piggybacking on the brand they've created, so i don't know how breweries get away with advertising, "now aged on pappy!!" quite brazenly. there may be some lawsuits over trademarks in the future.

i think the beer industry is largely cannibalizing resold barrels (way more breweries want barrels now than 4 years ago), in addition to the normal demand that existed from e.g. scotch distilleries (which often buy used bourbon barrels).

this link covers what frequently happens to bourbon barrels after they are emptied. there has always been an aftermarket for bourbon barrels in the spirits industry. i don't have numbers, but i assume that the extra demand that craft breweries are adding to that list is only a drop in the bucket, and that prices for used barrels probably aren't going up all that much.

one reason i assume this is that bcbs, a pretty large-batch barrel-aged beer, has managed to keep a constant price for several years now. if their margins were being squeezed by increased cost of barrels on a widespread basis, gi would have increased prices to compensate, especially if they were trying to demonstrate financial viability to inbev in the year or two before the sale. i can certainly assume that they get the benefits of scale, but as a trend i don't think used barrels cost more now.

iow, i think the move to low-quality barrels in the fifty-fifty program is an effort to increase margins: source cheap-shit barrels and sell for higher prices.

this link covers what frequently happens to bourbon barrels after they are emptied. there has always been an aftermarket for bourbon barrels in the spirits industry. i don't have numbers, but i assume that the extra demand that craft breweries are adding to that list is only a drop in the bucket, and that prices for used barrels probably aren't going up all that much.

one reason i assume this is that bcbs, a pretty large-batch barrel-aged beer, has managed to keep a constant price for several years now. if their margins were being squeezed by increased cost of barrels on a widespread basis, gi would have increased prices to compensate, especially if they were trying to demonstrate financial viability to inbev in the year or two before the sale. i can certainly assume that they get the benefits of scale, but as a trend i don't think used barrels cost more now.

iow, i think the move to low-quality barrels in the fifty-fifty program is an effort to increase margins: source cheap-shit barrels and sell for higher prices.

Click to expand...

I'm not sure if the barrels 50/50 uses are that much cheaper than the larger whiskey suppliers. Sure niche and uber craft bourbon makers (PvW) can go for a premium because their re-sale business is much like their liquid sales, low volume & specific. Beer suppliers make up such a trivial percentage of the used barrel sales for the larger guys that even though the margin is quadruple that of the normal re-sale it means nothing. Not until recently has Ops even started to explore this avenue.

Without giving specifics, a new charred american oak barrel is around $110 and it can sell anywhere from $115- $230 after on the re-sale with the highest prices going to small volume(relatively speaking) craft beer makers.

Not too mention, many of the big guys don't control used barrels in the same way they do new ones so the liquid/vintage may be difficult to track on the re-sale.

Beer Trader

Without giving specifics, a new charred american oak barrel is around $110 and it can sell anywhere from $115- $230 after on the re-sale with the highest prices going to small volume(relatively speaking) craft beer makers.

So that's less than a dollar per bottle overhead for barrel cost. Fuck it, let's double the cost of the barrels. $2/bottle. That doesn't explain why the bottles are $25+ ea. (unless you bought futures, then it was $20+).

Same thing goes for other breweries that charge that much for regular BA beers (looking at you, North Coast!)

Beer Trader

So that's less than a dollar per bottle overhead for barrel cost. Fuck it, let's double the cost of the barrels. $2/bottle. That doesn't explain why the bottles are $25+ ea. (unless you bought futures, then it was $20+).

Same thing goes for other breweries that charge that much for regular BA beers (looking at you, North Coast!)

Click to expand...

Spot on.

The marginal cost of the barrel plays a small part in the COGS. Any slight sourcing efficiency may shave a few basis points but doesn't move the needle. It's all economy of scale.